Why India's sports federations are now required to register as NGOs

On 24 October 2016, the Indian Government informed all Indian Non-Governmental Organizations (NGOs)[1] that to continue to receive grants from the Government Ministries they must register as a NGO with the National Institution for Transforming India (NITI) Aayog.

This article examines the rationale and requirements behind the new initiative, before outlining the immediate effects and concerns it presents for India’s National Sport Federations (NSFs) and the Indian Olympic Association (IOA).[2]

The current structure and role of India’s Sports Federations

NSFs regulate their respective sports at the national level. They are registered under the Societies’ Registration Act of various States.[3] Each NSFs is affiliated to the International Governing body that governs the respective sport. These bodies are annually granted recognition by the Government’s Ministry of Youth Affairs and Sports (MYAS) if they comply with relevant criteria, including filing accounts, the legal status of the body, and other requirements to ensure transparent functioning.[4]

As a consequence of registration and recognition, NSFs are granted a number of benefits that range from funding (including tax benefits during the import of goods or equipment, financial assistance for coaching, travel, equipment, boarding, lodging) to being able to use the term “India” in their name (which shows that they enjoy patronage of the Government).

The new registration requirements for NGOs

The NITI Aayog[5] is a Government think tank established by the Prime Minister to replace the Planning Commission. It is meant to serve as a platform to involve the administrators of the various state governments (the Chief Ministers of all States). Its establishment is part of the Indian Government’s wider attempts to tackle corruption in the country and to improve governance standards and transparency.

The new registration process for NGOs is the NITI Aayog’s latest initiative. They originally issued two Memos detailing the new registration process:

The first Memo,[6] dated 24 August 2016, states that all NGOs should register with the NITI Aayog portal (NGO-PS (Partnership System) Portal) after which they would be given a unique ID to be used in all future communication with Government Ministries. All applications for grant of funds would have to be accompanied by the entities unique ID number, together with its PAN (Permanent Account Number) and Aadhar number, a disclosure of its sources of funding for the last 3 years, and a copy of its best practices.

Once the details are registered in the portal and the Unique ID is generated, all further transactions and applications for grants and aid are to be made through either the portal or the website of the respective Ministry. Important this ensures that the entire process of disbursal of funds now takes place online.

The memo also asserts that in case of funds/grants which were sanctioned in previous years but which were yet to be released (or were to be released in the current year), the MAYS shall “insist” that the NSF Register at the portal by providing the required details before any further release of grants.

Subsequently, a second Office Memo[7] was issued clarifying that government organizations and government promoted organizations were not required to register on the portal.

After the Government’s announcement, the IOA and a number of NSFs asked for clarification about the registration requirements. There was some confusion as to whether NSFs needed to register as NGOs at all, or whether they would continue receive funding if they did not register.

To address these concerns, a formal “clarification”[8] note was issued by the MAYS Press Information Bureau. The note reiterated that the NSFs were “not Government organisations”, and as such were required to register as NGO’s if they wished to continue to receive Government grants. [9]

The first major issue: receipt of foreign contributions

One immediate issue for India’s NSFs registering as NGOs is that they will be required under the terms of the Foreign Contribution (Regulation) Act, 2010 (FCRA) to report all foreign contributions (unless specific exemptions are granted). This means they must, among other things:

register with the Central Government;

agree to accept such contributions only through designated banks;

report all foreign contributions to the Central Government within 30 days of receipt;

file annual reports with the Home Ministry (under Form FC-6) detailing the amount of foreign contribution, the source of such contributions, the manner of receipt of such funds, and the purpose of receipt of such funds must be clearly mentioned;

As per the FCRA, if more than 50% of the office-bearers of such organizations change, such organizations must apply to the Home Ministry for approval of such change. Until such change is approved by the Ministry, the FCRA registration of the organization shall stand “suspended” ad interim. The Government will have to ensure that there is a process to allow speedy reflection and registration of such changes to ensure the smooth functioning of NSFs.

Guidelines of the FCRA also provide that organizations which have been granted permission to receive funds from foreign sources, may provide funds from its FCRA account to another organization only if the recipient organization also has clearance to receive funds from a foreign source. This could prove to be an issue in case any funds are further allotted to District or State Associations. Additionally, any interest/dividend received from such funds, in India and in Indian Rupees, must be declared in Return Form FC-3.

For receiving any foreign funds, an FCRA account would also be required to be opened, and each time a payment or a grant is made, permission would be required from the Government to receive it. This could cause immense inconvenience to the various NSFs as any delay occasioned on account of funds could have a crippling effect.

With regard to the office bearers of such NGOs, as per Notifications issued by the Ministry of Personnel, Public Grievances and Pensions,[10] all NGOs receiving grants of more than Rs. 1 crore (approximately $147,000) annually will come under the jurisdiction of the Lokpal (India’s anti-corruption body, which has jurisdiction over "all Members of Parliament and central government employees in cases of corruption" as per the provisions of the Lokpal and Lokayuktas Act, 2013[11]). As such, all office bearers shall be deemed to be ‘public servants’, which means that they shall be required to declare their assets and liabilities under section 44 of the Act, annually. While this is in the best interests of Sport, it remains to be seen how office bearers will react.

Other concerns about Government overreach and the IOA’s position

On 4 November 2016, the IOA’s Executive Council held a meeting to discuss grievances voiced by NSFs about the initiative.[12] A number of NSFs were reported to have considered this directive as amounting to Governmental interference, although for now it seems that the NSFs have registered on the portal to avoid a confrontation with the Government. Though the Government insists that such measures are required to single-out non-performing NSFs, the NSFs are reportedly of the view that this move could give the government sweeping powers to interfere with and control their workings.[13]

The Executive Council of the IOA resolved to register on the portal for the time being. IOA President, Mr. N. Ramachandran, recently stated that although he had asked the NSFs to register as well, the IOA would be writing to the Government asking it not to treat NSFs as NGOs.[14]

The implementation and the ramifications of this move by the Government could theoretically be challenged as overreach on the part of the Government. It may be a possible contention in legal proceedings that since most NSFs are registered under the Societies’ Registration Act, it would fall upon the Registrar of Societies of the respective States to impose such restrictions upon the NSFs. However, considering these contentions have previously been negated (most notably in Cricket Association of Bihar v. Board of Control for Cricket in India) it seems unlikely any challenge on this ground would hold water.[15]

For now, the outcome of these new measures will depend upon the stance of the Government after the last date of registration for NSFs. Minor inconveniences and additional filings notwithstanding, cessation of funding could be the tipping point at which the NSFs start knocking on the doors of the Courts.

References

[1] NGOs, in India generally operate on a not-for-profit model. A number of NGOs receive funding from overseas, and thus represent a diverse range of issues and causes. The Government has put in place provisions which govern the funding of NGOs, which essentially aim to maintain transparency in the receipt and expenditure of grants and funds.

[7] Memo no. M-11/16(2)/15-VAC, ‘Clarification regarding signing-up by the Government Organisations/government promoted Organisations on the NGO-PS Portal of NITI Aayog for applying for grants from Central Government Departments/Ministries’, ngo.india.gov.in, dated 08 September 2016, viewed on 25 November 2016, https://ngo.india.gov.in/ngo/Clarification_OM_8_9_2016.pdf

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Ms. Aahna Mehrotra is the principal lawyer at AM Sports Law and Management Co. She was called to the Bar in May 2011 and has gained considerable exposure through her experiences at different institutions worldwide.

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